Gold prices in Dubai fell below 500 dirhams; 24k lost 30.5 dirhams in a month

The start of the week was marked by stable gold prices in Dubai, coinciding with the beginning of the Indian festival Navratri on Sunday. According to data from Dubai Jewellery Group, 24-karat gold was priced at 505.5 dirhams per gram on Monday. Meanwhile, 22-karat, 21-karat, and 18-karat gold traded at prices of 468, 448.75, and 384.75 dirhams per gram, respectively. The most affordable option, 14-karat gold, sold for 300 dirhams per gram on Monday morning.

The nine-day Navratri festival is considered an auspicious period for purchasing gold. During this holiday, many people buy gold jewelry, coins, and bars, viewing them as symbols of prosperity, wealth, and good luck. Retailers often note an increase in demand as families make festive purchases and investments.

Spot gold fell by 0.16 percent to $4188 per ounce, while silver dropped by 0.14 percent to $223.55 per ounce.

Simon-Peter Massabni, Head of Business Development at XS.com, noted that gold is entering a critical phase, trading around $4185 per ounce while attempting to regain the $4200 level. He added that one of the primary factors supporting gold is the weakening US dollar and falling Treasury yields, which could give the precious metal more room to recover. A weaker dollar makes gold cheaper for holders of other currencies, and lower yields reduce the opportunity cost of holding an asset that does not generate regular income. However, according to his forecasts, these favorable conditions will only persist if yields continue to decline. If the dollar regains strength and Treasury yields rise again, gold could quickly lose a significant part of its recent momentum.

According to Massabni, the most important factor determining gold's next move will be the US Consumer Price Index report expected this week. He emphasized that markets analyze inflation not as an isolated economic indicator, but as a key factor shaping expectations regarding the Federal Reserve's monetary policy. If inflation comes in below expectations, pressure for tighter monetary policy may ease, and yields could fall, creating a more favorable environment for gold growth. Conversely, if the data shows more persistent inflationary pressure, expectations for further interest rate hikes could resume, potentially pushing the dollar and yields higher and putting new pressure on the precious metal.

Massabni expects increased volatility before the report release, and the market's reaction to any inflation surprise is likely to be more significant than current fluctuations in gold prices.

Gold prices in Dubai continued to decline on Tuesday morning due to the strengthening US dollar and rising treasury bond yields. The price of 24-karat gold dropped to 496.75 dirhams per gram at the market opening on Tuesday, compared to 498.50 dirhams per gram recorded at the close of trading on Monday. Over the last month, the metal has lost 37 dirhams per gram.

Other varieties of the precious metal also showed a decrease: 22K, 21K, and 18K fell to 460.00, 441.00, and 378.00 dirhams per gram, respectively, on Tuesday morning. Spot gold decreased by 0.18 percent, reaching $4122 per ounce.

The drop in gold prices in Dubai and across the UAE is occurring shortly before the start of the Indian festive season, which brings some relief to buyers preparing for Navratri, Dhanteras, and Diwali celebrations. As previously reported by Khaleej Times, the decline in prices below 500 dirhams per gram has prompted some expat and Non-Resident Indian (NRI) families to accelerate their gold purchases ahead of the festival.

Chris Weston, Head of Research at Pepperstone, noted that short-term investment prospects for gold remain challenging. He stated that the price, which is a key factor in sentiment and flows, continues to look heavy and is in a short-term downtrend. There is rapid selling after the rally, and sellers maintain control. Weston believes that a break below recent lows around $4110 is becoming increasingly likely, which could accelerate sales towards $4100, and potentially even $4000, where strong demand was observed in June, July, and August.

In Weston's view, the market currently remains a seller's market. For the situation to become more favorable in the near term, a breakthrough above the $4275 mark is necessary. He added that the basis of this weakness is the growing alternative cost of holding gold, as several traditional macroeconomic factors work against its investment appeal. Weston pointed out that there is limited inflow into GLD ETFs or gold mining company ETFs, while the US dollar remains well-supported, and the USD index holds above 102 and approaches multi-year highs. Furthermore, the real yield on 10-year US bonds rose to approximately 2.93 percent, sharply increasing in August and September and reaching cyclical highs. This poses a significant obstacle for an asset like gold, which does not generate income.